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In Jennings-Clyde v. Canada (Attorney General), 2025 FCA 225, the Federal Court of Appeal addressed a foundational—but increasingly contentious—question in Canadian tax administration: how far does the Canada Revenue Agency's discretion extend when considering taxpayer relief requests, and what level of explanation must accompany an eventual refusal that affects a taxpayer's substantive financial interests?
The case concerned the CRA's refusal to permit the taxpayer to file corporate income tax returns late under subsection 220(3) of the Income Tax Act, which effectively barred the taxpayer from claiming refunds under subsection 164(1). The appeal did not focus on the technical details of those provisions or the taxpayer's ultimate right to a refund. Instead, it presented a broader issue—whether the CRA can deny discretionary relief without providing a clear explanation of why the discretion was unavailable or improperly exercised.
The CRA argued that subsection 220(3) could not be used to extend the three-year refund deadline in subsection 164(1), asserting that Parliament had clearly indicated through the enactment of subsection 164(1.5) that ministerial discretion was removed.
It also attempted to differentiate the Federal Court of Appeal's earlier ruling in Bonnybrook Park Industrial Development Co. Ltd. v. Canada (National Revenue), which had affirmed that subsection 220(3) could operate alongside other refund provisions. However, the CRA offered no substantial analysis of the text, context, or purpose to support either position, nor did it allow the taxpayer to respond to the precedent it relied upon.
The Federal Court of Appeal upheld the appeal, not by granting the requested tax relief, but by setting aside the CRA's decision due to insufficient reasons and ordering a new redetermination. In doing so, the Court issued a clear reminder that administrative discretion in tax matters is subject to the rule of law.
Applying Vavilov with unmistakable clarity, the Court reaffirmed that when administrative decision-makers interpret statutory provisions or reject taxpayer submissions, they must provide reasons that genuinely engage with the legislative scheme and the arguments presented. Assertions lacking analysis, conclusions without explanation, and reliance on unarticulated reasoning are unacceptable in modern public administration.
Jennings-Clyde is therefore not merely a late-filing or refund case. It is a decision on accountability, procedural fairness, and the minimum standards governing the CRA's discretionary decision-making.
For taxpayers navigating taxpayer relief applications—often involving significant sums and high stakes—the decision underscores the importance of reasoned decision-making and highlights why engaging an expert Canadian tax lawyer at the earliest stages of a relief request can be critical, both in shaping the administrative record and in preserving effective judicial review options should the CRA's discretion be exercised without adequate justification.
Subsection 220(3) of the Income Tax Act: Discretion, Not Immunity
Subsection 220(3) of the Income Tax Act grants the CRA discretionary authority to extend statutory deadlines and permit late filings where the circumstances warrant relief. While the provision is often described as an equitable safety valve within an otherwise rigid tax system, Jennings-Clyde confirms that the existence of discretion does not place CRA decisions beyond meaningful legal scrutiny.
Where the CRA concludes that subsection 220(3) is unavailable or inapplicable, it must explain that conclusion through a principled interpretation of the Income Tax Act, rather than by assertion or unexplained distinction.
Notably, the Federal Court of Appeal did not rule that subsection 220(3) must be exercised in favour of the taxpayer, nor did it broaden the substantive scope of the relief provision. Instead, the Court highlighted that discretionary authority comes with a corresponding duty to provide clear reasons grounded in the statutory text, context, and purpose.
What the Taxpayer Sought—and How the CRA Responded
The taxpayer sought permission to file its corporate income tax returns after the deadline to preserve access to refunds that would otherwise be barred by the three-year limit in subsection 164(1) of the Income Tax Act.
In practice, requests often arise when late-filed returns would give effect to legitimate deductions, loss carry-forwards, or other tax attributes that can be utilized only once a return is filed and assessed. By invoking subsection 220(3), the taxpayer asked the CRA to exercise its discretionary power to accept the late submissions so that its tax position could be determined on the merits rather than foreclosed by the passage of time.
Requests of this kind are generally driven by practical concerns rather than strategic tax planning. Often, taxpayers seek relief to avoid permanently losing refunds or tax attributes that would otherwise be forfeited due to a missed filing deadline.
Regardless of the amounts involved, these requests invoke the CRA's taxpayer relief mandate and create a reasonable expectation that any exercise—or refusal—of discretion will be based on a careful and reasoned application of the statutory framework, considering the taxpayer's specific circumstances.
The CRA denied the request, asserting that subsection 220(3) could not be used to extend the refund deadline in subsection 164(1). In support of that conclusion, the CRA claimed to distinguish the Federal Court of Appeal's decision in Bonnybrook Park Industrial Development Co. Ltd. v. Canada (National Revenue), stating that Parliament had "made it clear" through subsection 164(1.5) that ministerial discretion was not available.
However, the CRA provided no substantive explanation for either position, offered no analysis of the text, context, or purpose of the relevant provisions, and relied on reasoning that was not shared with the taxpayer for comment before the decision was issued.
Therefore, according to the Federal Court of Appeals, "the analysis and reasoning in support of whatever grounds the Agency was invoking? Nothing." This highlights that when significant taxpayer relief requests are involved, securing proper representation by a top Canadian tax litigation lawyer is often essential to ensure that the CRA's reasoning is clearly articulated, the statutory framework is correctly applied, and any shortcomings in the decision-making process are identified and challenged through the appropriate administrative and judicial channels.
Why the CRA's Decision Fell Below the Reasonableness Standard
Under the Vavilov framework—the Supreme Court of Canada's leading authority on administrative reasonableness—administrative decisions must be reasonable in both their outcome and their justification. In this sense, the Federal Court of Appeal states that "as a general principle, we do not allow an administrative decision-maker like the Agency to decide a matter affecting someone's rights or practical interests unless it gives an adequate explanation for its decision, or the explanation is otherwise evident or discernable."
Reasonableness requires more than a conclusory result; it demands a transparent chain of analysis showing how the decision-maker (CRA) interpreted the statutory text, considered the relevant context, and applied the legislative purpose to the facts before it. In Jennings-Clyde, the CRA's refusal failed that standard because it rested on unexplained assertions rather than on discernible reasoning capable of being understood and reviewed.
The CRA argued that subsection 220(3) could not be used to extend the refund deadline in subsection 164(1), asserting that Parliament had "made it clear" through subsection 164(1.5) that discretion was not available. However, the CRA provided no analysis of the statute's wording, no explanation of how subsection 164(1.5) interacted with the broader legislative scheme, and no justification for ignoring binding appellate authority.
Consequently, the decision lacked the internal coherence and rational basis required by Vavilov, making it unreasonable not because the outcome was necessarily incorrect, but because the reasoning process was unclear, unsupported, and ultimately indefensible on judicial review.
Remedy and Practical Implications Going Forward
The Federal Court of Appeal was careful to emphasize the limits of its role on judicial review. While it found the CRA's decision unreasonable, it did not grant the requested taxpayer relief or order that the late-filed returns be accepted. Instead, the Court set aside the decision and remitted the matter to the CRA for redetermination, directing the CRA to give the taxpayer a fair opportunity to make submissions on all relevant issues and to decide the request again with adequate reasons. The outcome reinforces that judicial review concerns the lawfulness of the decision-making process, not the substitution of the Court's view for that of the administrator.
From a practical perspective, Jennings-Clyde carries essential implications for taxpayers and advisors navigating relief requests under subsection 220(3). The decision confirms that, while the CRA retains discretion to deny relief, it must do so through transparent, defensible reasoning grounded in statutory interpretation.
Pro Tax Tips – Practical Guidance for Taxpayer Relief and Late-Filed Returns
The Jennings-Clyde decision highlights that taxpayer relief requests often succeed or fail not because of sympathy or fairness considerations, but because of how clearly the statutory framework is engaged and explained. Taxpayers seeking relief under subsection 220(3) should ensure that their submissions made by experienced Canadian tax lawyers so that they are tightly structured, factually supported, and expressly linked to the text, context, and purpose of the Income Tax Act. A generalized plea for fairness or hardship, without statutory grounding, leaves the CRA with little incentive—or obligation—to provide meaningful reasons.
From a practical perspective, taxpayers and corporate groups should treat relief requests with the same caution and preparation as any other significant tax filing. This includes maintaining a clear written record, anticipating possible CRA objections, and proactively addressing relevant case law rather than waiting to respond. Engaging an experienced Canadian tax litigation lawyer early in the process can be crucial in shaping the request, ensuring the CRA applies the correct legal standards, and safeguarding judicial review options if the decision is ultimately denied without sufficient reasons.
FAQ – Key Questions on CRA Taxpayer Relief and Discretionary Decisions
Can the CRA deny taxpayer relief simply by saying the decision is discretionary?
No. Jennings-Clyde confirms that where the CRA asserts that discretion is unavailable, it must explain why—by reference to the statutory text, legislative context, and purpose. A bare assertion that Parliament has "made it clear," without analysis, is not sufficient.
How can taxpayers reduce the risk of a poorly reasoned CRA relief decision?
Taxpayers can significantly enhance their position by submitting relief requests that are thoroughly documented, legally justified, and directly connected to the statutory framework from the beginning. Submissions that anticipate potential CRA objections, address relevant provisions explicitly, and explain how discretion can be lawfully exercised are more likely to generate a meaningful response and reduce the likelihood of a superficial or unsupported denial.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
